Property & Wealth

Unlocking title deed conundrum will boost economy, social stability

South Africa’s economy can be boosted dramatically, transformed and inequities reduced if the process of giving people living in government-supplied houses title deeds is properly addressed.

In January this year we advocated in this column that South African authorities should take a leaf out of the book of Chinese economic planners who recognised the essential role of the real estate industry in driving their ambitious plans and growth targets.

And, in January this year, we wrote that the residential market in traditionally black urban townships has the potential to save not only the property market, but can do much more for the wider economy,

In a recent article on the Moneyweb website Ray Mahlaka quoted FNB’s managing executive for housing finance, Dr Simphiwe Madikizela, as saying: “When you release title deeds wealth is created for the community.

“Once people have the title deed, they can extend property and make a living off the property by renting the rooms. They can use their home as collateral to get loans for other personal purposes,”

Dr Madikizela, however, also revealed that in Ngwathe in the Free State alone, where FNB has since 2013 been involved in a Free Market Foundation (FMF) project to release title deeds to people, about 30 000 title deeds are yet to be issued.

Across the country, there are seven to ten million opportunities to release title deeds, especially in rural areas where land is owned by communities and chiefs who give permission to occupy the land.

Since 1994 the South African government has built and delivered more than three million RDP houses. Yet at least a third of these houses still do not have individual title deeds attached to them.

Since 1994 the private sector in the bigger municipalities has also constructed 1.625 million residential buildings.

Future plans

Human Settlements Minister Lindiwe Sisulu, told Moneyweb that the department is looking to release a further 1.5 million housing opportunities in the next three years, as it is getting to grips with a housing backlog that stands at two million.

She pegged the deeds backlog to deeds that have been processed by the Registrar of Deeds but that have not been collected. There is a perception that it is better not to have a title deed as a municipality would then stop paying for water and other services for a property, she said.

“We need to educate beneficiaries of the government housing programmes on the importance of a title deed. When they understand the importance and the value they will ensure that they collect the title deeds,” Sisulu argued.

More nuanced problem

Industry players, however, say the problem is far more nuanced. Research by Urban LandMark released in 2011, found that the biggest reason behind the title deed backlog is the stalled processes of township establishment and proclamation, which is delaying the registration of a new housing area or neighbourhood.

Underscoring this is that housing development projects go ahead without the approval of a general plan for a new area, as the players involved lack either the time or expertise (or both) to address the many underlying issues that need to be resolved on certain tracts of land.

The problem also seems to have been exacerbated by the revisions to the payment process for developers of government-subsidised houses. Until 2003, the registration of the title deed in the name of the beneficiary was first needed before the final two payments could be made to developers. Changes followed, allowing developers to be paid before the registration of title deeds in the beneficiary’s name.

The rationale for the change was that the transfer processes of title deeds were complex and took too long to implement, which delayed the developers’ access to payment. Since the change, Urban LandMark has found that the registration of title deeds for subsidised properties has progressively declined.

According to Dr Mark Napier, a principal researcher at the Council for Scientific and Industrial Research’s built environment unit, there are some title deed cases that are difficult to resolve and get worse as time goes by.

“From the day when people might have moved into their RDP houses, a spouse might have died and the property might be in the name of the deceased and there might be children who have inherited that house or there are distant relatives who might be seen as an owner in the community, but cannot be seen in the same way by a conveyancer.

The resale of RDP properties – often in an informal market that developed – are also complicating the housing ownership pattern.

Affordability

Napier says reform is also needed when it comes to the affordability of getting a deed – a fairly expensive exercise for the poor. “It’s definitely the case that land ownership is designed with wealthier individuals in mind ... If an area is not properly declared in the first place, then the whole process of getting a title deed is an expensive exercise,” he adds. A title deed has a price tag of about R1 950.

The department is working with the Estate Agency Affairs Board (EAAB) to fast-track the release of title deeds. Sisulu says the EAAB has spent time understanding the backlog and devising plans to address the problem.

Conclusion

It is clear that the residential property marked has already undergone almost revolutionary change since 1994.

However, if a holistic programme can be devised to speed up and broaden the base of title deeds to people who live in millions of home across the country, it could dramatically improve the economic status and position of untold numbers of people.

It will also make a huge contribution to social stability in the country.